Another Investigation Into HP's Autonomy Allegations

Published 12:38 AM ET Tue, 12 March 2013
Reuters

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Hewlett-Packard Co's lead independent director defended Chairman Ray Lane and two fellow board members on Monday against moves to oust them over the mismanaged acquisition of Autonomy Plc, which British authorities are investigating.

In a detailed letter to shareholders on Monday ahead of the company's annual general meeting, Rajiv Gupta said the board had laid a solid foundation for HP's turnaround and warned that ejecting long-time directors would destabilize the company.

In a separate filing on Monday, HP said that Britain's Serious Fraud Office had joined the U.S. Department of Justice in opening an investigation into Autonomy.

HP, which bought the British firm for $11.1 billion, took a massive writedown on its value last year and accused former Autonomy executives, including then-Chief Executive Mike Lynch, of accounting fraud.

Gupta did not address the Autonomy angle in his letter, but outlined the credentials of all three men that leading proxy adviser ISS recommended be removed for their role in the deal.

In particular, he highlighted Lane's global and management experience as former chief operating officer of software giant Oracle Corp.

"Losing some of our directors in an abrupt and disorderly manner could undermine our efforts to stabilize the company," Gupta, a former CEO of specialty materials maker Rohm & Haas, wrote on Monday.

"What the company needs now is stability and consistency of leadership so that the board and the management team can devote all of their focus and energy towards executing on our strategic plan."

HP CEO Meg Whitman is trying to revive a company once synonymous with Silicon Valley but which fell on hard times in a contracting personal computing market, by re-focusing the sprawling corporation on enterprise computing services.

But last week, ISS, closely followed by investors seeking guidance on controversial issues, suggested voting against Lane, a managing partner at high-powered Silicon Valley venture capital firm Kleiner Perkins. They also gave board members John Hammergren and G. Kennedy Thompson the thumbs-down.

The same day, proxy firm Glass Lewis recommended shareholders vote to remove four directors -- venture capitalist Marc Andreessen and Gupta, along with Hammergren and Thompson.

Both firms blamed the directors for inadequate due diligence relating to the acquisition of Autonomy. But Gupta on Monday repeated HP's official recommendation that shareholders vote to re-elect all current directors.

The recommendation against Lane marked one of the few "special cases" in which ISS has advised shareholders against re-electing the chairman of the board.

In 2012, it recommended against Wal-Mart Stores Inc Chairman Robson Walton and other directors for failing to fully investigate allegations of widespread bribery by company officials in Mexico.

And in 2009, ISS advised shareholders to vote against re-electing Bank of America Chairman Ken Lewis, following its costly acquisition of Merrill Lynch.